Banking Financial Awareness · Commerce Accountancy

Credit, Debt, and Finance

1,382 Questions

This topic covers essential concepts of credit, debt, and finance including bankruptcy, debt recovery, and financial acts. These questions are frequently asked in banking and IBPS exams. Test your knowledge of financial terminology and loan classifications.

Debt recovery actsBankruptcy filing proceduresFinancial classificationsMedium term financeCredit loss management

Credit, Debt, and Finance Questions

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Provision for cash discount on debtors is a percentage of _________________.

  1. Debtors

  2. Net debtors

  3. Net debtors less provision for doubtful debts

  4. Net sales
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Discounts allowed to the existing debtors in the next year are debited to the Provision for Discount Account and not to the Profit and loss Account.In other words, the amount of the provision for discount is calculated after deducting bad debts and provision for doubtful debts from sundry debtors.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Provision for Doubtful debts are also called ______________.

  1. Provision for Bad and Doubtful Debts

  2. Provision for Losses

  3. Provision for repayment

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Option A is correct. The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. It is not provision for losses because It is for losses that business may occur but it is not confirmed yet. It is doubtful. Also it is not provision for repayment because business has to receive the amount from debtors. Provision for Doubtful debts are also known as Provision for Bad and doubtful debts. 

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

_________ is created for the possible loss which may arise by non payment of debts by debtors.

  1. Provision for Doubtful Debts

  2. Provision for Discount on Debtors

  3. Bad-debts on debtors

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A provision for doubtful debts is created to cover the loss of possible bad debts by means of a predetermined percentage of net debtors (i.e.., debtors less bad debts) with a view to bring in a certain element of certainty in the amount of bad debts charged for each accounting period.

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

The provision for bad debts is made by crediting __________.

  1. Profit and loss account

  2. Debtors account

  3. Provision for bad debts account

  4. Trading account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The provision for bad debts might refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for doubtful accounts, or Allowance for Uncollectible Accounts. In this case, the account Provision for Bad Debts is a  contra asset account (an asset account with a credit balance). It is used along with the account Account receivable in order for the balance sheet to report the net realizable value of the accounts receivable.

Provision for bad debts is made by debiting profit and loss A/c and crediting provision for bad debts account.

 

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

If cash discount is offered to customers, then which of the following would increase?

  1. Sales

  2. Debtors

  3. Debt collection period

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
A cash discount is allowed by the organization to the customers to get the collection fast against the credit sales. Customer also do the trade off between the discount and the cost of funds. Offering cash discount may lead to increase in sales.
Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Which of the following statements is true?

  1. A debenture holder is an owner of the company.

  2. A debenture holder can get his money back only on the liquidation of the company.

  3. A debenture issued at a discount can be redeemed at a premium

  4. A debenture holder receives interest only in the event of profits.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is standard practice for companies to issue debentures at a discount while agreeing to redeem them at a premium, creating a loss on issue.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

When debentures are issued at par but are redeemable at premium, the entry is:

  1. Bank Account DebenturesPremium on redemption of debentures Dr. Cr.Cr.
  2. Bank Account DebenturesLoss on the issue of debenture Dr. Cr. Cr.
  3. Bank Account Loss on the issue of debenture DebenturePremium on redemption of debentures Dr. Cr. Cr.Cr.

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When issued at par but redeemed at a premium, the premium on redemption is a loss. The entry debits Bank and Loss on Issue, and credits Debentures and Premium on Redemption.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Debentures cannot be redeemed at ___________.

  1. premium

  2. discount

  3. par

  4. more than 10% premium
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debentures are a debt obligation. Redeeming them at a discount would mean paying back less than the face value, which is generally not permitted as it would be unfair to the debenture holders.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Which of the following is false?

  1. Equity is owner's estate and the debenture is a debt

  2. Rate of interest on debentures is fixed

  3. Debenture holders get preferential treatment over the equity holders at the time of liquidation

  4. Interest on debentures is an appropriation of profits
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest on debentures is a charge against profit, not an appropriation. Appropriations are distributions of profit (like dividends), whereas interest is an expense that must be paid regardless of profit.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

In debenture account _________ is to be mentioned.

  1. Name of the debenture

  2. Rate of interest

  3. Date of issue of debenture

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The name of the debenture account typically includes the rate of interest to distinguish it from other debentures issued by the company.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Interest is paid to the person who produces the interest coupon attached to debenture in case of -

  1. Bearer Debentures

  2. Registered Debentures

  3. All types of Debentures

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Option A is correct.

The debentures which are payable to bearer and whose names do not appear in the register of debenture holders are known as “Bearer Debentures”. Coupons for interest are attached to the document and interest is paid to the holders as it falls due. Bearer Debentures are transferably by mere delivery.

Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

Installment credit scheme is introduced by ________.

  1. IDBI

  2. IFCI

  3. UTI

  4. SIDBI
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Installment Credit Scheme was introduced by IFCI. Under this scheme, better flexibility in repayment period and simplicity in interest calculation is provided. To avail this scheme, the company should have satisfactory track record of its credit worthiness and financial position.

Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

The IFCI granted credit assistance to __________.

  1. public limited companies

  2. co-operatives engaged in manufacturing, mining and generation and distribution of electricity

  3. small and medium industries

  4. both (A) and (B)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  • First, the main function of the IFCI is to provide medium and long-term loans and advances to industrial and manufacturing concerns. It looks into a few factors before granting any loans. They study the importance of the industry in our national economy, the overall cost of the project, and finally the quality of the product and the management of the company. If the above factors have satisfactory results the IFCI will grant the loan.
Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

The SFCs are granted credit assistance to ___________.

  1. large public limited companies

  2. cooperatives

  3. small and medium sized industries

  4. all of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

SFC stands for State Finance Corporations. It promotes medium and small industries of the particular states and also ensures balanced regional development, employment generation and vast ownership of industries.